Problem 14: An online learning platform An online learning platform provided less amenities...
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Problem 14: An online learning platform**
An online learning platform provided less amenities and offers to people who had a monthly membership. Market research is conducted and it is found that the learning platform users are willing to pay a higher price for better amenities and offers. It has also been found that the higher price would cover the costs for these improvements. However, the implementation of this scheme has not been decided yet even though the learning platform is trying to make more profits.
Which of these choices, if true, would most help to explain the learning platform's decision in light of its objectives?
Show answer & explanation
The platform wants to maximize profit. If very few users are leaving due to poor amenities, the risk of losing a large customer base by raising prices (even if the price covers costs) may outweigh the potential gain, or the current low-cost model is already optimally capturing the market without churn.
Step-by-step Derivation:
Step 1: Identify the goal - The platform wants to make more profits.
Step 2: Identify the proposed action - Increase amenities and increase price (which is covered by the higher price).
Step 3: Identify the paradox - Why not implement a plan that users are willing to pay for and that covers its own costs?
Step 4: Evaluate Option A - If competitors don't offer better amenities, it actually makes the platform's proposed plan more attractive (competitive advantage), so it doesn't explain the hesitation.
Step 5: Evaluate Option B - This discusses 6 and 12 month users, but the prompt specifically focuses on monthly membership users. It is too narrow and introduces new variables.
Step 6: Evaluate Option C - 'A few' users being satisfied is a weak statement and doesn't provide a strong business reason to avoid a profit-increasing move.
Step 7: Evaluate Option D - If very few users are deterred by the current lack of amenities, the platform has a stable user base at a low cost. Raising prices might alienate the current mass of users who are content with the low price, meaning the 'willingness to pay more' might only apply to a small segment, potentially reducing overall profit through a loss in total volume.